They had to go. The statutory disciplinary and grievance procedures introduced by the government in 2004 were not only unpopular with all sides, but they also failed in their fundamental objective of encouraging employers and employees to resolve their disputes internally.

Instead, employers found themselves calling their lawyers whenever an employee launched a grievance, and unfair dismissal cases became bogged down in legal argument about compliance with the statutory procedure rather than the substance of the claim.

The Employment Bill 2008, currently before Parliament, repeals the statutory procedures in their entirety. From April 2009 – and possibly even earlier – the current procedures will simply be an uncomfort­able memory for policy makers.

So does this mean that employers will no longer need to worry about following a fair procedure in dealing with a grievance or before dismissing an employee? Absolutely not. Even if the law reverted to what it was before the procedures were introduced, procedural issues would still dominate unfair dismissal law. But the Bill does not merely turn back the tide. It also gives added strength to the role of Acas in defining good practice. Under the Bill, a tribunal will, in a wide range of cases, be able to take into account any unreasonable breach of an Acas code of practice relating to the resolution of disputes when deciding compensation. If an employer acts unreasonably in breach of the code then compensation may be increased by up to 25%. Similarly, if an employee acts in breach then compensation may be reduced by up to 25%.

Acas is currently working on a new code of practice for disciplinary and grievance issues to reflect the forthcoming change in the law, and it is likely that a consultation will take place during the spring and summer.

The content of the code should not be too controversial, how­ever. The principles of good practice in this area are long established and already well understood by most larger employers.

In fact, whatever the details of the code, the underlying principles – particularly when it comes to disciplinary issues – are still likely to be based on the three key rules of natural justice that have been held to apply to internal disciplinary hearings. These are:

The employee should understand what they have been accused of

The employee is allowed to explain their side of the story and

The employee’s explanation is given genuine and open-minded consideration by the employer.

A useful exercise is to look at any disciplinary procedure – no matter how detailed – and see how each element is designed to support one of these three rules. For example, the procedure might provide for the employee to be given copies of all the witness statements gathered in the course of the investigation. This supports the first two rules of ensuring that the employee understands the accusation and also has a chance to prepare a defence in response.

The procedure may also provide for the case to be heard by a manager from a different area of the business or at least that the hearing will be conducted by a manager not directly involved in the investigation. This supports the third rule that there will be an open-minded consideration of the employee’s explanation.

If any element of the procedure does not relate to one of these three rules then it may well be worth questioning why it is there at all.

A light touch?

We can be confident that the Acas code – whatever shape it finally takes – will reinforce the well-established practice that supports the rules of natural justice. A key challenge for Acas is to come up with a single code that will suit employers of all sizes and in both the public and private sectors.

So as not to place an unreasonable burden on small employers, it seems inevitable that the code will adopt a light touch and shy away from placing too many specific burdens on employers. This is particularly likely since, for the first time, there will be a direct financial penalty for failing to comply with an Acas code.

Inevitably, however, larger employers will be expected to provide a level of procedural fairness that goes beyond the minimal requirements of the Acas code. An important provision of the Employment Bill will make it even more important that employers comply with such high standards.

As well as repealing the statutory procedures themselves, the Employment Bill also repeals section 98A of the Employment Rights Act 1996. This is the provision that not only provides that a dismissal in breach of the statutory procedure is unfair, but also that, as long as the statutory procedure was complied with, the employer can defend any additional procedural failings by arguing that they ultimately made no difference to the final outcome.

Under the law as it currently stands, an employer who fails to carry out a full investigation, or who allows the disciplinary hearing to be conducted by the same manager who made the allegation in the first place, would not necessarily lose an unfair dismissal claim. These breaches of good practice are not covered by the statutory disciplinary procedures (which simply require a disciplinary meeting to which the employee has been given a written invitation and from which the employee has a right to appeal) so the dismissal will not be unfair if the employer can show that these procedural failings made no difference to the outcome and the employee would, more likely than not, have been dismissed in any event.

The power of procedure

With the repeal of this provision, the law reverts to the position as it was before October 2004 when the case of Polkey v AE Dayton Services Ltd applied.

Under the Polkey principle, if an employer behaved unreasonably in dismissing an employee – by not following a fair procedure, for example – then that could make the dismissal unfair even if, ultimately, dismissal was an inevitable outcome. What mattered was whether the employer behaved reasonably, not whether dismissal was a fair result.

With the repeal of section 98A, the Polkey principle will be restored and all of the procedural requirements relating to issues such as who conducts the disciplinary hearing, what evidence is presented, how it is assessed and what access the employee has to that evidence will again become crucial. A failure in one of these areas, even though not strictly a breach of the Acas code, may be enough to render the dismissal unfair.

The employment tribunal will still be able to do justice between the parties. Compensation levels will continue to be adjusted to reflect the ‘no difference’ element. Thus if the employer has made a procedural error, but dismissal was inevitable even if the error had not been made, then the tribunal would be likely to reduce compensation by 100% to reflect that fact. Nevertheless, the tribunal would be able to award compensation for procedural breaches that currently are covered by the ‘no difference’ rule.

This means the forthcoming Employment Bill, far from reducing the need for employers to follow a fair procedure, makes such procedural issues even more important.

Our expert

Darren Newman has been an employment lawyer for more than 15 years. He began his career working at IDS as a researcher and writer for more than six years working on IDS Brief, covering all aspects of employment law.

Previous roles include head of employment law and social affairs at Chemical Industries Association, and as an employment law consultant for the mentor service at The Royal Bank of Scotland.

Most recently, Newman has been working for Butterworths as head of IRS training, and is now an independent consultant running courses on any aspect of individual or collective employment law. He will be leading a masterclass at the upcoming IRS Employment Law conference on 14 May.